CH12

demand for money increases

During an economic expansion when real GDP​ increases, the

the nominal interest

Every​ day, ________ changes to make the quantity of money demanded equal the quantity of money supplied.

increases, rises

Shoeminus−leather costs arise from inflation because the velocity of circulation of money​ ________ as the inflation rate​ ________.

forego interest on an alternative asset

The opportunity cost of holding money is that you

money

The proposition that in the long run when real GDP equals potential​ GDP, an increase in the quantity of money leads to an equal percentage increase in the price level is the called the quantity theory of

the price level

The quantity of money demanded is proportional to

nominal, increases

The quantity of money demanded will decrease if the _______ interest rate _______.

the nominal interest rate

When the Fed changes the quantity of​ money, there is an immediate effect on

people want to hold less money

When the opportunity cost (or value) of holding money​ increases, then

an increase, an increase

An increase in the price level leads to​ ________ in the demand for money and an increase in real GDP leads to​ ________ in the demand for money.

confusion costs.

If inflation is making it difficult for people to estimate the true marginal benefits and true marginal costs of​ activities, inflation is leading to

4. [(p multiplied by y) / quantity of money] = 6.0 t / 1.5 = 4

If nominal GDP is​ $6.0 trillion and the quantity of money is​ $1.5 trillion, then the velocity of circulation is

increases

If the inflation rate​ increases, the velocity of circulation ________

the value of money

In the longminus−​run, money market equilibrium determines

lowers, raises

In the long​ run, an increase in the quantity of money​ ________ the value of money and​ ________ the price level.

velocity of circulation

average speed that dollars circulate in an economy as people use them to buy goods and services.